Reasons Why You Should Dissolve a Limited Company

As a business owner, you will be faced with making decisions that can affect your company’s future. One of the biggest decisions that you will have to make is whether You Should Dissolve a Limited Company.

Many business owners think that it is a better idea to liquidate the company to dissolve the business. This might be a good idea if you are selling your company’s assets, but there are other reasons why it is better to dissolve a limited company. 

A limited company can be dissolved either voluntarily or by the court. Dissolving a limited company is quite different from liquidating your assets, and there are some advantages to choosing dissolution.

Liquidation is a term that refers to the process of converting your assets into money. 

Some of the reasons why you would choose dissolution are:

To Stop Your Company from Being a Legal Entity

If you want to avoid the hassle of maintaining a limited company, then simply choosing this option will end your business. Your business will no longer be an active entity. You can then choose to set up another company, but you are free to take time off from the business world.

You can dissolve your company and avoid filing annual returns. This is only possible if you have no assets or profitable business transactions.

To Avoid Paying Out Debts

Shutting your business down is a way of avoiding creditors. Dissolution will end the legal authority of your company, and this makes it possible for creditors to close in on any outstanding debts. 

Once you dissolve your limited company, you can file for bankruptcy and get yourself exempted from paying any debts.

Closing down your company might not prevent your creditors from chasing you, but it can buy you time and save money if you have already paid off all of your debts.

Closing down a limited company can also help you avoid paying taxes. 

Please be aware that if, as directors, you give personal guarantees with a debt, like those that are required when you secure a holiday let mortgage via a limited company, then even if you dissolve the company itself you will remain personally liable for the mortgage debt due to the existence of the Personal Guarantee.   

To Save Money

When considering the costs of dissolving a limited company, you should not just look at the filing fee. You should also look at the other costs involved. These include:

a.  Annual filing fees

b. Ongoing charges for holding your company’s registered office

c.  Paying your directors and employees, whether they are full-time or part-time.

d.  Paying for any equipment or supplies that are necessary to run your company, including transport costs

e. Legal fees

f. Accounting fees

Saving money is a major incentive for closing down a limited company, and this should be one of the major reasons why you should dissolve a limited company. 

To Protect Your Personal Assets

Closing down your limited company will protect your personal assets. Limited liability means that you are liable for the debts of your company up to the value of your shares in the company, but this is not the case if you are personally liable. 

If your company goes under, all of its debts will be on you. If you do not have enough money to pay all of the company’s debts, you could be sued for everything that you own.

If you dissolve your limited company, you will avoid being personally liable for any of the business’s debts. Dissolving a limited company protects your personal assets and ensures that you will not lose everything to pay off your company’s debts.

To Avoid Long-Term Contracts

Limited companies are obliged to keep their contracts until they expire, even after they have moved to liquidation. Limited companies will be obliged to continue with long-term contracts, including leases for office space. 

However, if your company is being dissolved voluntarily, then you can break these contracts. Attempting to end a long-term contract without having the option to dissolve your limited company could result in extra legal fees.

If Your Business is Not Profitable

A limited company must be able to pay all of its debts and expenses, including taxes and wages. If your company cannot do this, then consider dissolving it. 

If you cannot make a profit and your company is unable to pay its debts, then continuing with the limited company will only leave you with more debts. 

Closing down your limited company will make it possible for you to avoid the continuing costs of administering and maintaining this business structure while you are not making any profits.

If You Are Starting Another Business

Closing down your limited company can help you to move on from your previous business structure. 

When you dissolve your limited company, you can leave it as one business and start another as a new limited company. 

This will mean that you will avoid any confusion about which company is responsible for the debts of the previous business. 

Dissolving your limited company can help you to avoid any disputes about who is responsible for the debts from the past business, and it will make sure that any communication from creditors is sent to the right company.

If You Are Retiring

Dissolving your limited company is an easy way to retire. Once your company is dissolved, you will no longer need to run the business or maintain it. 

You will no longer have to pay for the business’s employees, accountants, or directors (and you will not need to take on any new business ventures).

You can begin to enjoy your retirement by liquidating the company and receiving the money that it is worth. 

Dissolving your limited company is the best way to leave your business without any problems.

If you are thinking of retiring, then consider dissolving your company as it is easy and it will ensure that there are no problems with leaving.

You can then use the time that you would otherwise spend working with your company for your personal interests.

Conclusion

Dissolving a limited company can be one of the best ways to avoid certain legal obligations. If you are looking for the advantages of being your own boss, then dissolving a limited company can help. You can avoid paying dividends, filing annual returns, and certain regulations. You can also avoid having to pay taxes on your profits.

You will need to consider the costs of dissolving your limited company before you make your final decision, but it is clear that there are many benefits to dissolving a limited company.